Principal Issues: Whether there may be allowed under subsection 118.3(2) in respect of a dependant resident in the US, the amount that would have been allowed had that dependant been resident in Canada.
Position: Yes
Reasons: Pursuant to paragraph 3, Article XXV (as amended) of the 1980 Canada-US Tax Treaty, there may be allowed under subsection 118.3(2) in respect of a dependant resident in the US, the amount that would have been allowed had that dependant been resident in Canada
June 28, 2006
Sharon Yetts, Senior Programs Officer HEADQUARTERS Legislation and Partnership Section D Tiu Benefit Programs Directorate (613) 957-8961 Canada Post Building, East Tower 750 Heron Road 2006-018246
Disability Tax Credit ("DTC") of a Supporting Canadian Resident in respect of a US Resident Dependant
We are writing in response to your April 19, 2006 inquiry on the above subject and our subsequent telephone discussions (Yetts/Tiu). You inquired whether there may be allowed under subsection 118.3(2) in respect of a dependant resident in the US, the amount that would have been allowed had that dependant been resident in Canada.
You indicated the following in your inquiry:
? the dependant US resident meets the eligibility criteria for the DTC under sections 118.3 and 118.4 and would presumably be filing the appropriate non-resident T1 return;
? the DTC eligible US resident is dependant on the supporting Canadian resident for at least some of his or her basic necessities in life, i.e., the supporting person's contributions are not to sustain a higher standard of living; and
? the supporting Canadian resident is able to claim in his or her T1 return the DTC eligible US resident as an infirm adult dependant, or could so claim if the dependant's income is zero and on the basis that the DTC eligible US resident is treated as if he or she is a Canadian resident for purposes of the subsection by the Canada-US Tax Treaty.
It is our opinion that pursuant to paragraph 3, Article XXV (as amended) of the 1980-Canada-US Tax Treaty, there may be allowed under subsection 118.3(2) in respect of a dependant resident in the US, the amount that would have been allowed had that dependant been resident in Canada.
We trust that the foregoing is satisfactory.
Robin Maley
Section Manager
For Division Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch